JPMorgan lists three missing supports for a chip rebound after the SOX's 21% July fall

The SOX's 21% July fall ^[2] needs a gain of about 27% to reverse, since 1 divided by 0.79 is 1.27 ^[14]. Crypto Briefing's summary does not give the size of October's decline or how much of July's loss the index recovered. That figure is the cost of a full round trip.

The hedge fund detail cuts two ways. Tech-focused funds that lost more than 10% in their TMT strategies were forced to deleverage in July ^[4]. The report says hedge fund engagement in AI infrastructure has diminished since ^[10], so there is less hedge fund leverage left to flush out. Or rather, less of that particular leverage: leveraged ETFs and margin accounts remain. What is left is more sensitive to retail options and margin activity ^[10], and the strategists flag leveraged ETFs and broader positioning as amplifiers of further declines ^[7]. Issuers are not stepping in either. Buybacks have stalled ^[6], so the companies themselves are not buying their own shares.

We think a quick bounce is the wrong base case for AI infrastructure and Korean memory names, where the sell-off has been hardest ^[9]. Two other outcomes are plausible. The market's focus has moved from how much companies spend on AI to whether the spending makes money ^[11]. The summary says companies that show real revenue from it may hold up better ^[13]. A rebound could then arrive selectively, and for fundamental reasons. Financing could also set the pace: credit default swap spreads on Oracle and SoftBank have widened ^[8], and a reversal there would ease one of the pressures the report cites.

We would be wrong if the SOX rallies hard while short interest stays low and retail stays away ^[6], because that would mean JPMorgan's list of causes is incomplete. The summary describes the findings as being about mechanics, not fundamentals, and says the underlying AI promise remains intact ^[12].